Chapter 4: Analysis and interpretation of financial statements 1.

from the following balance sheet of ABC ltd for the year ending 31st Dec 2002 & 2003 you are required to prepare a comparative Balance sheet Particulars 2002 2003 Assets Cash in hand 5000 5500 Cash at bank 3500 5000 Sundry debtors 45000 40000 Stock 35000 40000 B/R 11000 11000 Prepaid Expenses 2500 3000 Fixed assets 150000 165000 Total assets 252000 270000 Liabilities & Capital Share capital 135000 145000 Short term loan 32000 35000 Long term debt 45000 42000 Bills payable 7000 5000 Sundry creditors 6000 8000 Bank overdraft 27000 35000 Total Liabilities & Capital 252000 270000

2. From the following particulars of XYZ ltd for the year 2007 and 2008, you are required to prepare a common size statement Statement of Profit and Loss Account Particulars 2007 2008 Net sales 4000 5000 Less: cost of goods sold 3000 3750 Gross profit 1000 1250 Less: operating expenses Office & admn.exp 200 250 S&D exp 225 300 Total operating exp 425 55 Net profit 575 700

3. From the following profit and loss account and balance sheet you are required to prepare I. Comparative Income statement II. Comparative balance sheet III. Common size income statement IV. Common size balance sheet

Profit and loss account 2002 25000 100000 15000 2000 1000 5000 7000 5000 75000 235000 2003 30000 125000 17000 3000 2000 6000 8000 7000 72000 270000 2002 200000 25000 10000 2003 225000 30000 15000

To opening stock To purchases To wages To freight To factory expenses To office & admn expenses To S&D exp To non operating exp To net profit c/d

By net sales By closing stock By non operating income

235000

270000

Balance Sheet as at 31 Dec. Liabilities B/P Creditors Provision for tax Proposed dividend Bank overdraft Debenture Preference share capital Equity share capital Long term loans General reserve 2002 5000 10000 7000 5000 10000 50000 100000 125000 200000 28000 540000 2003 7000 15000 10000 8000 10000 60000 150000 160000 250000 30000 700000 Assets Cash in hand Cash at bank B/R Debtors Stock Land and building Goodwill Furniture Plant &m/c 2002 3000 10000 7000 10000 20000 200000 100000 40000 150000 2003 5000 20000 10000 15000 25000 250000 125000 50000 200000

540000

700000

4. Calculate the trend percentage from the following figures of Ram & Ci. Ltd taking year 1999 as the base year Year 1999 2000 2001 2002 2003 Sales 2000 2500 3000 3500 4000 Cost of goods sold 1400 1800 2200 2600 3000 Gross profit 600 700 800 900 1000

5. From the following information interpret the results of operations of a manufacturing concern using trend ratios. use 1995 as base. amount in lakhs of rupees for the year ended

Net sales Cost of goods sold Gross profit Operating expenses Net operating profit

1995 100 60 40 10 30

1996 95 58.9 36.1 9.7 26.4

1997 120 69.6 50.4 11.00 39.4

1998 130 72.8 57.2 12 45.2

6. From the following information you are required to calculate cash from operations Particulars 2009 2010 Trade debtors 100000 94000 B/R 20000 25000 Trade Creditors 40000 50000 B/P 16000 12000 o/s Expenses 2000 2400 Prepaid Expenses 1600 1400 Accrued expenses 1200 1500 Income received in advance 600 500 Profit made during the year ----260000

7. X ltd made a profit of Rs.185000 after considering the following.You are required to ascertain cash from operations. Depreciation on fixed assets Profit on sale of building Loss on sale of machinery Provision for taxation Provision for doubtful debts Transfer to general reserve Goodwill written off Following additional information is also given: 31.12.1997 31.12.1998 Debtors 18000 17000 Creditors 12000 9000 B/R 7000 4000 B/P 3000 3500 Outstanding expenses 4000 2000 Prepaid Expenses 2000 2500 3

8. From the following balance sheet of M Ltd. Prepare cash flow statement for the period ended 31st Dec.1990 liabilities Creditors Mrs. Devas loan Loan from bank Capital 1.1.1999 40000 25000 40000 125000 31.12.1999 44000 ---50000 153000 assets Cash Debtors Stock Machinery Land building 1.1.1999 10000 30000 35000 80000 40000 35000 230000 31.12.1999 7000 50000 25000 55000 50000 60000 247000

230000

247000

During the year, a machine costing Rs.10000[accumulated depreciation Rs.3000] was skid fir Rs.5000.the provision for depreciation against machinery as on 1.1.1999 was Rs.25000 and on 31.12.1999 Rs.40000.Net profit for the year 1999 amounted to RS.45000. You are required to prepare cash flow statement. 9. From the following balance sheet of M Ltd. Prepare cash flow statement for the period ended 31st Dec. 1990

Liabilities Equity share capital Preference share capital General reserve P& L A/c Proposed dividend Creditors B/P Provision for taxation

1989 300000 150000 40000 30000 42000 55000 20000 40000 677000

1990 400000 100000 70000 48000 50000 83000 16000 50000 817000

assets Goodwill Land & Bldg Machinery Stock Debtors B/R Cash and bank

1989 115000 200000 80000 77000 160000 20000 25000 677000

1990 90000 170000 200000 109000 200000 30000 18000 817000

Additional information: a. Depreciation Rs.10000 and Rs.20000 have been charged on machinery and land and buildings respectively in 1990 b. An interim dividend of R.20000 has been paid in 1990 c. Rs.35000 income tax was paid during the year 1990 10. The following schedule shows the balance sheets in condensed form of Swaraj Co. Ltd. You are required to prepare a cash flow statement Liabilities Sundry creditors Outstanding expenses 8% debentures 1.01.2000 51500 6500 45000 31.12.2000 48000 6000 35000 assets Cash Debtors Temporary investments 1.01.2000 45000 33500 55000 31.12.2000 45000 21500 37000

Depreciation fund Reserve for contingencies P&L A/C capital

20000 30000 8000 115000 276000

22000 30000 11500 115000 267500

Prepaid expenses Stock in trade Land& bldg machinery

500 410000 75000 26000 276000

1000 53000 75000 35000 267500

The following information is also available: a. 10% dividend was paid in cash. b. New machinery for Rs.15000 was purchased but old machinery costing Rs.6000 was sold for Rs.2000; accumulated depreciation was Rs.3000 c. Rs.10000, 8% debentures were redeemed by purchase form open market at Rs.96 for a debenture of Rs.100 d. Rs.18000 investments were sold at book value. 11. a. Given current ratio is 3.75, working capital is RS.357500, calculate the amount of current assets and current liabilities b. Cost of goods sold is Rs.240000 stock turnover 6 times, opening stock is RS.6000 more than closing stock. Calculate closing stock. 12. Find out the average collection period for following Total gross sales Rs.100000 Cash sales 20000 Sales returns 8000 Debtors 9000 B/R 2000 Provision for doubtful debt 1000 13. The following is the summarized P&L A/c of Raj Products Ltd. For the year ending dec.31,1991 and B/S as on that date: Profit and loss account

To opening stock To purchases To incidental expenses To gross profit To operating expenses S& D Administration

9950 54525 1425 34000 99900 3000 15000

By net sales By closing stock

85000 30000

By gross profit b/d By non operating income Interest 5

99000 34000 300

Finance To non operating expenses: Loss on sale of assets To net profit

1500

Profit on sale of share

600

400 15000 34900

34900

Balance Sheet Liabilities Issued capital: 2000 eq shares of Rs.10 each Reserves Current liabilities Profit &Loss A/c assets Land & Bldg. Plant & M/c Stock Debtors cash 1.01.2000 45000 33500 55000 7100 3000 48000

20000 9000 13000 6000 48000

You are required to calculate: a. b. c. d. e. 14. Current ratio Operating ratio Stock turnover ratio Return on total resources Turnover of fixed assets From the following figures and ratios, make out the balance sheet and the trading and Profit and loss account with as many details as possible a. Share capital :Rs.720000 b. Working capital:Rs.252000 c. Bank overdraft Rs.40000 There are no fictious assets. In current assets, there is no asset other than stock, debtors and cash. Closing stock is 20% higher than opening sock. I. II. III. IV. V. VI. VII. Current ratio=205 Quick ratio=1.5 Fixed assets/proprietary fund=.07 Gross profit ratio=20% Stock turnover=4 times Avg. collection period=36.5 days Net profit ratio=20% ***********